The present inventions are directed towards electronic trading systems. More particularly, certain embodiments of the present inventions are directed towards implied order quality in electronic trading systems.
An electronic trading system provides for electronically matching orders to buy and sell items to be traded. The items may include, for example, stocks, options, futures contracts, and commodities. Typically, an electronic exchange in the electronic trading system is used to match the orders. In addition, the electronic exchange provides market data to various client devices in the electronic trading system used by traders to place the orders. For example, the electronic exchange may provide market data such as prices for various items available for trading and trade confirmations indicating what trades have occurred at what quantities and/or prices.
A trader typically desires to know about as many buy and/or sell orders as possible for a particular market. For example, when trading in a particular market, a trader may find it useful to see direct orders in the market. In addition, a trader may find it useful to see prices and quantity that have been implied into the market, sometimes referred to as “implieds,” “implied quantity,” “implied quantities,” or “implied orders.” Implied orders are derived from direct orders in other markets. For example, orders in outright markets may imply orders into a spread market and orders in a spread market plus orders in an outright market may imply orders into another outright market. Providing implied orders along with direct orders in a particular market may improve price discovery and liquidity, for example.
However, implied orders may go away quickly and/or unexpectedly, so a trader is exposed to risk by relying on them. Current systems allow a trader to select whether implieds for a particular market should be shown and/or utilized for trading. A trader may be able to see either all implieds or no implieds, for example. Also, some current systems may be configured to show implieds for a particular market when the implied is available from a specified minimum number of sources. In this case, because the implied is available from multiple sources, this may increase the chance that at least a portion of the implied order will be available when the trader wishes to trade against it. However, this is still problematic as a trader may miss opportunities and/or not get the best price by ignoring some or all implieds and the trader is still exposed to risk by utilizing the implieds.